- April 27, 2017
- Massachusetts Budget and Policy Center
- Kurt Wise and Noah Berger
Economists consistently find that a well-educated workforce and a high-quality transportation system are among the bedrock elements upon which a prosperous state economy is built. Providing everyone with access to the education and training they need to reach their full potential boosts the productivity of individual workers and strengthens the overall economy. A well-functioning transportation system likewise strengthens the economy, allowing goods and people to move quickly and reliably to the places they need to be. (For a more detailed discussion of the impacts of state investments in education and transportation, see MassBudget’s report on these issues.)
While the economic importance of high-quality transportation infrastructure and public education are widely recognized, some fear that raising taxes to fund such investments could lead to high-income taxpayers leaving the state—particularly if tax increases are focused heavily on these high-income households. Fortunately, because there is wide variation in tax rates among the 50 states, economists have ample data with which to study this question. The most thorough studies have found consistently that tax rates influence the residence decisions of only a very small share of such households. Instead, high-income people—like other people—overwhelmingly choose where to live based on work and business opportunities, family and social connections, and the draw of an agreeable climate. The vast majority do not make their residence decision based on state tax rates. In this policy brief we examine the evidence on the likely migration effects of raising income taxes on high-income households—those with taxable annual income above $1 million—and the impacts on net state revenue.